Mervyn King Comes to Town

Fri 24th Sep 2010

As soon as Mervyn King, Governor of the Bank of England, was introduced at the TUC in Manchester, Bob Crow and the rest of the RMT delegation walked out in protest. “It is like a gathering of Christians inviting the Devil round for Christmas dinner”, commented Brother Crow. “The bankers are obviously on hard times these days, so he must have come along to pass around the hat.”

This was no ordinary visit by the Governor of the Bank of England. In fact, it was only the second time that someone in this all-powerful position had ever addressed the TUC in nearly 150 years. There was obviously an important reason. He was there to ask for help and understanding in these trying times.

He was both mild mannered and as sweet as a razor in his appeal to the TUC. He was ever so thankful for their help. “Members of your General Council have made a huge contribution to the Bank of England by serving on our board - the Bank’s Court”, stated the Governor. “Carrying on that tradition today is Brendan Barber.” At this point he turned to the General Secretary of the TUC and both nodded in approval. “By bringing a distinct and important perspective to our discussions, Brendan has helped us through some extremely turbulent times. I am grateful to him.” Brendan was, of course, delighted to receive such lavish praise as he gazed up at his old friend the Governor.

After the endearing formalities, Mervyn King got down to business. “Recent times have indeed been turbulent”, he said. “After a decade and a half of stability, with rising employment and living standards, came the crisis and recession – the biggest economic upheaval since the Great Depression.” Having set the scene, he then made a gesture, a sweetner, towards the TUC in a mea culpa. “We let it slip – we, that is the financial sector and policy-makers – not your members…”

He was sorry for the “slip”, as if he had left some imaginary economic ball drop through his butter-fingers. “The consequences are affecting everyone, and will continue to do so for years to come,” he said, as if we were all in the same boat, ordinary workers and bankers alike. He then turned on the sympathy, bucket-loads of the stuff. “Even so, around a million more people in Britain are out of work than before the crisis. Many, especially the young unemployed, have had their futures blighted.”

Then came the Governor’s coup de grace, “So we cannot just carry on as we are. Unless we reform our economy – rebalance demand, restructure banking, and restore the sustainability of our public finances – we shall not only jeopardise recovery, but also fail the next generation.” Who could resist such a compelling argument?

He then introduced his defence of capitalism as the only practical show in town. “To my mind, a market economy and its disciplines offer the best way of raising living standards,” which somewhat contradicted the austerity he was pushing. However, he went on to explain, “But a market economy cannot survive on incentives alone. It must align those incentives to the common good. It must command support among the vast majority who do not receive the large rewards that accrue to the successful and the lucky.” Capitalism in other words needs a broad appeal, despite the unfortunate tiny detail that the rich are getting richer and the poor are being ground down. In Britain, the share of National Income going to wages in the mid-1970s was 65%. Today, it has fallen to 55%. Over the same period, the rate of corporate profits has increased from 13% to 21%.

Under present circumstances, where capitalism needs rescuing, an all-out assault on the union’s members would simply inflame the situation. King’s visit to the TUC and conciliatory tone was part of a plan to draw his audience into his web of essential cuts and austerity.

As part of this attempt to ingratiate himself with the trade union bureaucracy, the Governor went on to criticize bankers’ bonuses and said that union members were “entitled to be angry”. He added, “I understand the strength of feeling. In fact I am surprised it has not been expressed more deeply.” Nevertheless, he stressed the need for drastic action to tackle the deficit, citing Greece as an example if this was not done. “It is clearly unsustainable… I would be shirking my responsibilities if I did not explain to you the risks of failing to do so.”

These words were designed to placate his audience and get them on side. “The road ahead is unlikely to be straight,” he explained. “There is considerable uncertainty about the prospects for both the United States and the euro area – our most important export markets. Business and consumer confidence at home has weakened recently, and it will be some time before our banking sector is able to finance a recovery on the usual terms.”

He reached out to the trade unions, better to embroil them in the need for austerity in the “national interest”. He stressed “our contacts with experienced union officials” were of enormous help. His plea – “we at the Bank of England and you in the trade union movement should work together” – stated as much. “With your help… we can set the right monetary policy”, he explained.

This attempt to pacify the TUC on behalf of a key representative of the ruling class amounted to the stark admission that they need to lean on the trade unions, especially their leaders, to help carry through the austerity programme.

Lenin once said that without the Labour and trade union leaders, capitalism would not last six weeks. Given the strength of the working class, the astute sections of the ruling class know that it is necessary to lean on the workers organizations (and especially their “moderate”, “responsible” and “statesmanlike” leaders) and get them to keep their members in check. Brendan’s important role at the Bank of England is part of this strategy of assimilating the union tops. They would like a “deal” with the unions. But such a deal would give nothing to the working class and is therefore unlikely to succeed.

The Governor of the Bank of England is nevertheless very clever and is playing a very astute game. This poses dangers before the working class movement. In the massive class battles that lie ahead, it is vital the workers’ organizations do not play the role of conciliator or have one arm tied behind its back. The situation requires an independent working class policy, not aimed at bending the knee to capital, but one which seeks to put an end to the market economy and all its ills. It also requires a bold leadership that will not be influenced by bankers and capitalists, but are prepared to go to the very end in their struggle to change society. The idea of inviting the Devil or the Governor of the Bank of England round for dinner is clearly not a good idea, especially when working class interests are on the menu.